by Permian Global

March 15, 2023

Ed Rumsey, Managing Partner, and Juan Chang, Head of Technical Operations here at Permian Global , joined Adam Nye of Argus, to talk about a range of topics on both the projects themselves as well as the market for the credits they generate.

“Voluntary carbon markets have continued to emerge recently, responding to the demand from corporates for a mechanism through which to offset their residual emissions, the emissions inherent in their operations, and their supply chains. And they seek to offset those emissions through the purchase of a carbon credit. A carbon credit was issued by a project that is engaging in activities that either seek to remove outright from the atmosphere or avoid emissions.

There is a variety of different projects globally being engaged in, and one of the core activities, project types, technologies, let’s say, that is represented in the market today is REDD+ or avoided deforestation. Avoided deforestation seeks to do exactly that, avoid deforestation, and to avoid the emissions associated with loss of forestry habitats and therefore, offsetting those emissions, but also providing co-benefits to ecosystems and communities.” Adam Nye (Argus Media)

Listen to the podcast below (42 minutes)

A transcript of the conversation follows below :

Adam: Welcome, everyone, to this first in a series of podcasts that we’ll be running on “Voluntary Carbon Markets.” Today, we will talk about REDD+ and I’m delighted to have Ed Rumsey and Juan Chang to guide us through this topic. Ed, and Juan, a warm welcome to you both.

Voluntary carbon markets have continued to emerge recently, responding to the demand from corporates for a mechanism through which to offset their residual emissions, the emissions inherent in their operations, and their supply chains. And they seek to offset those emissions through the purchase of a carbon credit. A carbon credit was issued by a project that is engaging in activities that either seek to remove outright from the atmosphere or avoid emissions.

There is a variety of different projects globally being engaged in, and one of the core activities, project types, technologies, let’s say, that is represented in the market today is REDD+ or avoided deforestation. Avoided deforestation seeks to do exactly that, avoid deforestation, and to avoid the emissions associated with loss of forestry habitats and therefore, offsetting those emissions, but also providing co-benefits to ecosystems and communities.

And so, I’m delighted that Ed and Juan are joining us to guide us through this topic. And perhaps we can start by, Ed and Juan, perhaps you could just introduce yourselves, tell us a little bit about your journey that brought you here today, and perhaps along the way you can explain to us the journey of Permian Global also.

Ed: Thanks very much, Adam, and thanks very much for inviting us to speak today. I’m Ed Rumsey. I’m one of the managing partners here at Permian Global. So, Permian is a business we started back in 2007. Realizing that we’re now into our 16th year, it’s quite daunting. But essentially, it’s a mission-driven business that we created as a means of driving private finance into tropical forest conservation and restoration as a tool to mitigate the most disastrous effects of climate change and contribute towards solving the climate crisis. So, that’s the sort of essence behind the brand.

And the thesis is to ascribe a value to standing forests such that they might out-compete alternative land uses. And the best way we believe you can do that is through carbon. So, carbon or better emission reductions or verified emission reductions is essentially the fungible or monetizable element to the projects. It’s the currency which you can link to valuing what has historically been philanthropic or public sector activity. I’m joined with my colleague, Juan Chang.

Juan: Hello, Adam. And thank you so much for inviting us. Well, I’m Juan Chang. I’m the head of technical operations at Permian. I joined Permian maybe three years ago, but I’ve known Permian since very early on, I think more than a decade we know each other.

Ed: Absolutely.

Juan: Yeah. And I’ve been working on this field for, I think, more than 20 years. And yeah, as Ed said, this is a way to generate the incentives to help not only protect and restore forests but also to improve livelihoods of communities that depend on the forests exclusively.

Adam: Thanks, guys. And perhaps you could describe a little bit Permian Global as a project developer, you know, where you’re present globally, and just a little bit about, you know, some of the characteristics of Permian Global as a project developer and how it’s different to others, maybe.

Ed: Sure. I think there are a number of actors in this space, and it’s a rapidly growing market. As I said, we’ve been around probably one of the longest. And I would say we’re dissimilar to some organizations, but we do have a particular area of expertise. So, we focus on natural tropical forest ecosystems.

So, that would also capture sort of peatlands and mangroves and what have you, but not really in the areas of afforestation, reforestation, tree planting or either. That’s not really the course of activities we undertake. And Juan touched on about improving livelihoods and the social development aspects of projects.

The perspective that we take here at Permian is that what we do is we invest in improving livelihoods by trying to create new sustainable economies in some of the most impoverished areas in the tropics, such that you can alleviate the pressure on the forest, that these economies are predicated on undertaking non-destructive activities. And actually the co-benefit of those sorts of investments, the byproduct is that you reduce emissions because you’re reducing deforestation. So, it’s [inaudible 00:04:55] way in which you think about it, but really the core activity is development.

Adam: Yeah. That’s interesting. It’s a different perspective, isn’t it? Where you think from the carbon market perspective, we think of co-benefits as being what sounds like being the primary…you know, the primary driver in your case.

Juan: Yeah. Let me just talk very briefly on what [inaudible 00:05:15]. But as a team, we’ve been recently increasing very fast our capacities, but focusing mostly on how to improve the quality of the measurement, the quantification, and deliver high-quality credits. So, in our team, we have, like, maybe more than 10 PhDs.

Ed: Nineteen is the number.

Juan: Nineteen. Okay.

Juan: Which actually means that we are a very science-based institution. So, we really believe that science needs to be behind any of the methods that are used to quantify [inaudible 00:05:59]. Indeed, it is not necessarily rocket science, but indeed science needs to be behind all these accounting methods.

Ed: But as you say, Juan, the fact that it’s science-based, it’s like any area of science. Science is iterative. As you learn more, you improve best practices. And that’s what the existing carbon accounting frameworks enable you to do. You can constantly update and develop and improve methodologies as the science moves forward.

Adam: Great. Thanks, guys. And perhaps you could take us through, you know, feel free to use one of your projects as a case study, maybe Katingan, for example, you know. But what might be helpful is just to have kind of a walkthrough of how a project comes about at the very beginning and perhaps when you’re looking at sort of site selection or getting interest from investors, all the way through the life cycle to the point at which you are issuing credits and the project is up and running. Could you give us a feel for some of those timelines and the sort of the story behind a project?

Ed: I’m gonna just add one sentence, Adam, and then I’m going to pass over to my colleague in that, essentially, you have to ensure what we’re doing is, as the term REDD+ state, it’s reducing emissions from deforestation and forest degradation. So, you need to be looking at areas of forest that you can credibly articulate there is a threat, and then design a project such that you undertake mitigation activities that alleviate that threat. And Juan will be able to explain that in far more detail than I am. That’s essentially the concept.

Juan: Yeah. Exactly.

Adam: Great.

Juan: And behind that concept, we have a process that starts with the identification of the projects. And we start with the more simple but essential and fundamental criteria, which is additionality. So, here we combine the potential of an area in terms of the carbon stocks that it has, and the threat that those carbon stocks would be released to the atmosphere. So, that could be through either preventing planned or unplanned activities that will cause those emissions. So, basically do a simple model of carbon stocks and the possibility of those stocks to be released. And that’s the start.

When we find the potential, then we have a look at the land tenure of these areas, which could be either public land, community land, private land. And that’s where the complexity starts because in many cases in some countries, they may or may not have the legislation for access into those lands. Of course, in the case of Katingan, for instance, it took, like, how many years to get the concession?

Ed: Well, the initial concept was proposed to the government in Indonesia back in 2006, 2007. The first application went in in 2008, but the first license, the first part of the license was granted in 2013, you know, five years later.

Juan: So, but of course, we’re talking about the pioneering project that time, and many countries now have more clarity and certainty what these kind of projects are about. But that’s an important point. In the case, if the area belongs to a community, for instance, then it needs to go through a very detailed and open transparent process of prior and informed consent and ask the communities if they are interested to take part of such projects.

And this usually is the process that takes most of the time, and in most cases can be the one that determines if a project can happen or not, access into the land. And after having that certainty that the project can happen, an agreement with the owners or the regulators of the land, then we go to the more technical aspects on measuring the carbon, doing the carbon inventory. Of course, it goes as well with the social diversity assessment of the land, so that we can measure later on the impact of the product.

So, all the information is translated into a document or some standards use the term PD, which means project description or a design document, which is a legacy from the CDM time, PDD. And that document goes through a third party or a validation, and then an auditor that checks if the accounting methods that the line tenure carbon rights are in place among other aspects.

And after that, you go through the implementation of all these actions. So, at that stage, you are only making assumptions and projecting future activities that will lead to the impact on climate, community, and biodiversity. And then you implement, and then you monitor those actions and create a monitoring report, which goes again to a third party. And that’s the stage of verification. And once that is verified, then you have the amount of carbon that goes into a registry, but then it’s able to be used for the carbon markets. And that’s where Ed has much more to say about it.

Adam: Just a quick question. The time period involved in the verification stage that you mentioned, just kind of going back one or two bullet points there. One, how much time are we talking about before you can get to the stage of actually issuing carbon? Is it normally has to be a complete year or how does that work?

Juan: Yeah. Well, different places are… It’s not a rule or a specific benchmark that applies for all places, because every place is different. So, once you have secured the land, which can be the process that takes the most of the time, as Ed was saying that something like several years. In other cases, it can take a few months.

So, after that process, and then you start with the validation and verification, I would say that roughly a validation process, once you have completed your documentation, can take around a year. And maybe the verification in theory should be faster because you already have the data and the auditors will look into the already existing information that was assessed at the time of the validation. So, it could be maybe six to eight months, but that’s a theory. There are many factors that can influence it that time.

Adam: Great.

Ed: Just to carry on on that point that’s sort of jargon. So, to put really simply, the PDD is where you outline the intention, what you intend to do with the project. And then the monitoring report actually measures the performance to describe what has actually occurred. Now, both of those documents are independently audited and they go out to public consultation. There’s plenty of opportunity for the sector and anyone else to comment on those documents through those periods of time.

As Juan quite rightly says, the lead time to developing these projects, these nature-based solutions projects, is really quite extensive due to that period where you have to socialize both for government, whether it’s local or federal, but also the local communities to get that buy-in and to essentially attain that social license to operate in that area such that people want to do the projects, you’re not imposing it on them.

But I think it can’t be over eight. It doesn’t really matter if the price of carbon goes through the roof or there’s a huge demand signal. That’s not going to expedite the development of these projects. That lead period to develop a project will always continue to exist if these projects will be undertaken correctly.

Adam: Yeah. Yeah. So, that’s a supply-demand response. This is something that we’ve talked about previously is the supply response to those price signals. And this is, you know, if we think about the market when we’re going forward and people are making predictions about the size of the potential scalability and growth of this market, the…let’s say the pull from price signals is gonna be relatively slow. It’s not gonna be a quick trigger. On that topic, can you take it now forward to the stage at which…or at what stage does the project actually start to issue credits? What are the steps that have to happen for that to happen and how does that process work?

Ed: So, Adam, once you get through that verification or the audit of the monitoring report measuring your performance, that’s fully signed off by the auditor, and then it’s submitted for an accuracy assessment with the standard who then approve that, your credits then, your verified emission reductions will then be made available in your registry account such that you can issue and start to transact at that point.

Adam: Great. Now, on that topic, perhaps we can just have a…just move away briefly from the project side of things to the market side of things. How can we describe the, let’s say the status quo for the market in REDD+ credits? How would you describe, for example, the channels that you typically sell these credits through? You know, is it typically spot sales to brokers?

And we can talk on a higher level, you know, just in general how the REDD+ market works. Is it long-term offtake agreements with traders and corporates, transaction through exchanges? Can you kind of give us the general kind of overview and picture of how it splits between those three, and who do you see as sort of the key buyers, you know, the key participants in that market from your point of view as a project developer commercializing these credits?

Ed: Absolutely, Adam. So, I’ll take you back around over the last two years where this market has significantly developed and matured. And I think one of the key triggers that instigated that was the work of the Taskforce on Scaling the Voluntary Carbon Market. The TSVCM launched with Mark Carney initially, but then others and facilitated by the Institute of International Finance and others, and McKinsey.

And essentially what came out of that first phase of the Taskforce was a rather hefty 120-page report with 17 key recommendations. But simplifying those 17 recommendations down to a single sentence, you could really say that there was broad consensus that if we standardize and commoditize the carbon offset market without sacrificing integrity, you would increase scale and liquidity.

Now, that concept holds true if you come from the commodity background. I fully agree with that. But it’s not necessarily the only way in which this market needs to grow as because there are so many other sort of additional attributes around these projects. Each project has its own sort of idiosyncrasies, even necessarily in more community side or the biodiversity side, depending on sort of proximity to populations, etc.

It really, what that did do it, it bifurcated the market into two really distinct camps. So, we’ve seen over the last two years the growth and the development of that sort of more natural commoditized elements of the market with the proliferation of many different market classes and exchanges. We’ve seen indexes and reference contracts be launched and futures contracts.

So, there is now that beast is being created, although that is growing to a certain extent more slowly than we might have hoped because there is still a huge proportion of the market whose preference is to trade OG&C because there is still that real appetite for understanding what is the product here being delivered.

If you think about the end-user demand, the buyer who wishes to offset their footprint, then the reason you might buy a carbon credit from a REDD+ project or a nature-based project, is not only just about that act of offsetting. It’s about all these other additional attributes. It’s about the social development and the biodiversity. It’s about which jurisdiction it’s in. And if you are only looking at just that commoditized element, you don’t necessarily know what it is the project that’s gonna be delivered through at that point when you receive the carbon offset. So, two quite distinct areas of the market and they price very differently. We’ve seen that price spread between the two broadening.

Adam: Yeah. Fantastic. And that’s a good segue, I guess, to the other areas I wanted to see if we could try to bring some clarity to, which is the area of co-benefits. Now, obviously, we have SDGs and we have the CCB certification from Verra. And then within CCB we have various levels, you know, we have Silver, Gold, Triple Gold, and then now SD VISta. Could you give us a little overview of those certifications and help us connect them somehow to what happens on the ground in a project and which way around you think about those, you know, you maybe give us a little bit of clarity around that?

Juan: Yeah. Maybe I can explain how this originated actually, particularly the CCB…

Adam: Please.

Juan: Which stands for Climate, Community, and Biodiversity. So, when the carbon markets, voluntary carbon markets started to emerge in, actually it started almost 20 years ago, but more actively, let’s say 15 to 16 years ago, you had, at that time one, of the standards was the VCS, voluntary carbon standard among others.

But these standards were only accounting for carbon exclusively and a group of NGOs and other institutions got together to develop this climate, community, and biodiversity standard. So, it was a parallel standard happening as a quality add-on to the carbon account. And over time, people realized that actually shouldn’t be just an add-on, but should be as part of the standard itself. And it merged with the VCS, which after was called Voluntary Carbon Standard turned into Verified Carbon Standard, and then the standard was renamed to Verra.

And so, the CCB was now merged into the VCS standard. So, you can apply in some cases where your point has these additional attributes, you can apply that standard as well together with the VCS. So, which started as an add-on and as a quality, we see it differently. And I was saying before, we see that the core of the business is to improve livelihoods, to protect and restore biodiversity. And as a consequence of that, you get to carbon. And when you do the projects right that generate those benefits, it also creates the price signal, actually the market response to these carbon credits that have these additional attributes with a different price.

Now, the SD VISTA is similar… [inaudible 00:22:05] similar attributes to the CCB, but measuring in terms of the [inaudible 00:22:10] goals, right? And you can also measure them. I haven’t seen much credit. I don’t know, you’ve probably seen more than I do if there is a market signal for those projects that report on the SDGs.

Ed: Yeah, we find the SDG sort of framework, the construct around how you measure against performance against the SDG is more useful as an internal tool, really measuring our own performance and setting our goals and targets and how we’re contributing towards each of those. And the nature of these projects, actually can heavily contribute to probably almost the 17 depending on which individual projects and jurisdiction and what have you. But that’s really been our sort internal framework of measurement of performance rather than something that’s been particularly [inaudible 00:23:05].

Adam: Yeah. Can you give us a…just to help visualize what co-benefits? You know, we talk about benefits, I think protecting biodiversity is something easy to understand. That’s, you know, effectively leaving it, providing the means that it gets left alone. As far as the community, as the communities are concerned, what does that mean in reality for those, you know, providing them with different sources of income and living conditions and so on? Can you give us a concrete example of the impact of one of these projects on those local communities? What does it mean in real terms?

Ed: Sure. I mean, I could start on that with Juan, essentially. So, the key element, which is pretty much utilized across all project types, is that we work with communities providing microfinance and vocational training to try and create new non-destructive businesses to alleviate pressure on forests. So, that happens pretty much across the board wherever we work.

But then the additional sort of characteristics of these projects really depends on what’s required in the communities. So, some communities may be far more remote, others may be more approximate to sort of market centers or larger populations. But then we focus on elements like education, for instance.

We’ve had significant education programs in a number of countries. In Columbia, for instance, we’ve reached a few thousand school programs across the Amazon region. And then healthcare. Healthcare is a really important element to our project. We host sort of weekly or biweekly healthcare clinics where we’ve actually built the site in which these clinics are held.

And then we partner with public health administrations to bring in doctors and then we finance them coming in to host clinics for… We break it up into age brackets and each week there’ll be one for the younger children, then sort of the adults, then for the elderly. And that’s been a huge benefit to these communities who previously didn’t have access so they had to travel quite far to receive healthcare. So, they’re the sorts of things that we would do.

Adam: Great.

Juan: Important also to highlight here that actually this is as demand-driven. It comes from the communities who develop their…sometimes the development plans and they request to the project how can we contribute to those? It’s not a top-down or imposed sort of activities. It is more on the consultation process with them.

Adam: It’s led by them. Yeah. Fantastic. So, I guess the next area we really wanted to talk about was the role of ratings agencies in the market. And this really kind of connects, I think, the two things, you know, connects the reality on the ground of these projects with the market for these traded credits. What’s your feeling and your view about the ratings agencies? Obviously so, Verra and BeZero becoming very present and widely looked at among others. And presumably, you see this as a good thing. And what’s your view on the ratings agencies and how their role might develop as the market matures and goes forward?

Ed: Yeah. Adam, I think, my opinion on these is incredibly clear. I know they’ve been received…there’s been mixed sort of response of how well they’ve been received in the market. You’ve named the two leading for this, so Verra and BeZero. I personally come from a financial services background and we’ve been crying out for ratings agencies in this sector for more than a decade.

And the reason why is that whenever you take some form of modeled approach, you have to base assumptions on what you are suggesting might happen and what it is you’re going to avoid. And having an independent third party review those assumptions to see if they’re realistic or credible adds a huge amount of value to this space. And I think these guys are doing a really good job. I think all it’s going to do is drive up quality and integrity and that’ll be reflected in pricing as well. But I know they have been, as I said, there’s been mixed response in terms of their interaction at the moment.

Juan: Yeah. I think they have a role to play and I think over time it adds robustness to the market if you have additional different pairs of eyes looking at how carbon is reported. And it’s an additional support to what the standards are already providing, which I think can help give more trust to the market.

Ed: I think what’s interesting that we’ve seen that but actually a little broad, but it’s not too much, but we haven’t necessarily yet seen the point where a higher rating directly correlates to a higher price achievable from the carbon credits generated project. And I’m not entirely clear as to why that is. Beyond in part, I would say that the carbon offset element, the use of the emission reduction, that’s your footprint, is not always the primary driver as to why you support one of these projects.

As such, if your demand is driven by a different element, such as the social development rather than the offset, maybe that ratings piece isn’t as relevant to you as a buyer and end-user. But beyond that, it’s as the market is still relatively immature, I think that’s what’s really happening there.

Adam: Yeah. Great. In terms of talking about prices and maybe some inefficiencies in the price structure that we have, on the topic of vintages, it’s quite clear that we have this effectively almost like a term structure whereby newer vintages trade at a premium to older vintages. It’s perhaps been seen as almost a proxy for quality. You know, the idea being that something newer has been issued by a system that is now mature and has perhaps, you know, come through more rigorous control.

So, I think in the…maybe in the absence of perhaps that’s something that as the ratings agencies grow into and the…you know, the coverage of the market is more thorough, the issue of vintages perhaps goes away. But what do you think about that effective discount that you have for older vintages and, you know, what…do you think that’s right and do you think that will tend to go away in the future? How do you view that?

Ed: Adam, you touched on this subject that really grinds my gears. But I think…

Adam: You’re welcome.

Ed: So, this comes back and there’s a bit of a backstory to it, but as you say, older vintages price very differently to newer vintages, and buyers do have a preference. And there is an element that has common sense around it, that perhaps the newest vintages available are using the best available science. Sometimes companies like to marry their emissions footprint more closely to emission reduction that was generated around that period of time.

But the reality is what you should be looking through to is the quality of the project, the methodology it’s using. If you are operating an avoided deforestation project or a nature-based solution project and that project has been operating for a period of time, the older emission reduction, if it’s still using the best available science and that project is continuing to use the same methodology, there is no reason why that credit should diminish in value.

The concept of vintage decay, as the traders are now calling it, is utter nonsense in our opinion because it is not a perishable good. Now, let’s touch on perhaps a suggestion as to where this became sort of concept in part. It really stems back to the creation of the compliance market for aviation. So, under the United Nations International Civil Aviation Organization, under ICAO, a compliance market was developed over the last decade, which was sort of conceptualized in 2013. It was agreed in Montreal at ICAO general assembly meeting in 2016 to be launched in 2020.

Now, this market is allowing you to use some emission reductions to offset a proportion of your footprint. It’s a compliance market. And the technical advisory board developing that market essentially took a view of what sort of credits would be eligible for it. And one of the forms of credits that’s eligible are CDM-certified emission reductions, the clean development mechanism if you asked.

Now, when they had established they would be eligible, it was suggested that there was a significant volume of those credits available in the market, and further volume that could be generated from existing registered projects. And as such, if they were all to be eligible in the market, then this compliance market would not incentivize any further climate action or further investment in emission reductions.

So, the idea was that if you put a vintage constraint on those sorts of credits, you would effectively curtail supply and incentivize further investments. Now, there was a discussion around at what point would you cut off the vintage? Was it 2013 when it was agreed as a concept, ’16 when it was approved, or 2020 when it launched? If you launched in 2020 with no vintage credit eligible, there’d be no supply. If you had in 2013 that was suggested, it would be oversupply. So, 2016 was taken as a [inaudible 00:32:57] compromise.

Now, for a five-year vintage cut-off, it was arbitrary. It was a decision that was made, no technical justification behind that. But the market picked up on that and that has now been construed in the market as anything that’s more than five years old significantly diminishes in value. And we find that very frustrating. It’s because there’s no technical reason why it should.

Adam: Great. Thanks. And maybe we’ll start to draw things to a conclusion because I think we’ve covered a lot of material. Just thinking a little bit about, we’ve talked about project-based REDD+ so far. We hear a lot about the jurisdictional REDD+ and nested REDD+. Could you just explain a little bit those terms and what they mean and give us a little bit of your thoughts as to what the direction of travel might be for REDD+ projects in that…in a jurisdictional context and how the two will come together?

Juan: Sure. Thanks for the question actually. It’s something that we always discuss every time with Ed. Well, where does the concept come from? I mean, the jurisdictional approach, it’s not new actually. It started from initiatives back in 2007 actually already since Global Landscapes Forum, the UN.

And when the REDD+ concepts were discussed under the convention, it started as a government-led process where jurisdictions were equivalent to a country. And then the concept moved on and said, okay, well, it can be also a subnational scale one level below the national, which can also count as jurisdictional or a biome large enough that can also count as jurisdictional.

And the concept behind is the scale, the importance of reaching the scale of the activity, and the impact which everybody agrees. Now, the reality is a bit more complex than that. I mean, the scale… We talk about jurisdictions, for instance, in jurisdiction, a state in Brazil is a jurisdiction, but a state in Brazil is in some cases bigger than many countries in Europe.

Together: [crosstalk 00:35:14.482].

Juan: Yeah, sure. I mean, show me how you did it in Europe and resolved all your problems in the whole country and we can replicate that in one of these [inaudible 00:35:25]. But sometimes it’s taken that I think sometimes the concept is taken at that level of simplicity.

Now, nested is a process that started demonstrating action on the ground at the smaller scale. And the idea of nesting was how these actions measured at the lower scales can be integrated into these larger areas of jurisdictions, which could be national. And that’s when the nested approach happened because you have different methodologies for accounting at the project level than accounting at the jurisdictional level. But that’s when the concepts start getting a bit convoluted.

And I personally think that it’s important to make a clear distinction what are the elements that are involved or entailed in a jurisdictional approach with… On one hand, you have the governance, who are the ones responsible to govern the jurisdiction, there’s national and subnational, and the different stakeholders within and the different rights between that area.

You can have a state or a region in a country where you have public land, you have community land, you have private land and they have different rights and different ways they use the land. Then you have the accounting where you have, of course, you need to do an accounting at the whole area to make sure that there is no…well, some people say the displacement or integrity of the accounting and… So, that needs to happen at that scale of accounting of jurisdiction.

And then you have the implementation that happens at different levels. As I said at the beginning, the governance will make sure that different rights in the different areas are respected. And same with implementation. If I am the owner of a piece of land, I can have the rights to do as the law allows me to do that. But implementation happens at different scales.

So, the expectation to have one single approach that you can implement everything at the same time with everybody synchronized is not very realistic. Another aspect that has also been usually included in this concept is that it’s a government-led process when we talk about jurisdictional approaches. But if you imagine that governments have a lifetime that doesn’t match with the life cycle of creating those changes that can happen over 20, 50 years and that’s where the projects have a stronger commitment on the ground where they can commit for these long periods, and as a private sector interventions compared to a government that changes every four, five years.

I’m from Peru and we’ve been changing presidents every year for the last five years. There’s lack of strong awareness to drive this long-term process. And they’re not divorced. We need to have implementation at different scales at a project level. And they have demonstrated over almost 20 years that…well, at least projects have been more than a decade are already around. And many of them have demonstrated success.

It is true that there is also the tendency to game the system and probably overestimate, but that doesn’t mean that everything is wrong. I mean, we need to improve those areas that are wrong and do it in the right way. And also I emphasize why we are very strongly a science-based organization. We really want to do things on the right way because it’s a fact. Nobody can deny that it is a fact that deforestation happens and we need to find an incentive to stop deforestation and we need to do it right. So, all these concerns that only when you do jurisdictional approach, that’s the only solution, I think that’s quite, I would say, naive to think that that’s the only way to do it.

Ed: I think you’ve put it really well, Juan. Essentially, we’re losing about 12 million hectares of forest every year. And we’ve been pretty [inaudible 00:39:33] as we’re trying to combat. And I said it at the beginning when we started talking on this podcast, the way in which we approach this is that we’re trying to ascribe a value to pieces of land such that we can out-compete other alternative land uses.

And so, we’re looking through to specifically types of land tenure and what can you do on that land and how can we avoid people doing those destructive activities? So, the way you do that generally is very long-term contracts that can out-survive changes in political administrations so you can continue undertaking these more positive activities. I mean, I don’t think anyone thinks, and hopefully, that President Lula is not… is gonna have the same environmental policies as President Bolsonaro. We’d like to think that he’s going to.

So, if these programs are gonna demonstrate what’s called permanence to ensure that the emissions reductions that you are generating are going continue in the long term, then they have to be able to out-survive political administrations. And that’s where we are getting down to a problem with what is currently proposed as the jurisdictional approach to [inaudible 00:40:39] problems seems to us to be a form of trying to nationalize a sector is saying that the responsibility to manage your forest and conserve them in the long term should be held back at the government. And we just haven’t seen that be successful anywhere in the world for a very, very long time. We feel it’s now time to harness private sector capital specialization and really drive the whole sector forward in terms of turning this into a success.

Adam: Great. Thank you very much, Ed. I think that’s a good place to bring the discussion to a close. I think we both talked about, we have quite a long list of other questions that we’d love to dig into, but I think that’s a really nice way to summarize it at the end there. So, we’re gonna leave it there for this podcast. So, Juan, thank you again. I look forward to seeing you in Malaysia where we continue the discussion there. You too, Ed, thanks very much for your time.

And I’d invite anyone who has any questions on that to feel free to reach out to me at If you have questions for me or if you have questions for Ed or Juan, feel free to send them through and I will redirect them to them. And of course, if you’re interested in looking at Argus’s publications, which have recently started on Voluntary Carbon Markets, you can find those on our website on the Voluntary Carbon Markets page. So, thank you, Ed and Juan, and goodbye to everyone.

Ed: Thanks very much, Adam, and thanks, Juan.

Adam: Thank you.


Thanks to Argus Media